Musings and meanderings on the wonderful world of wireless from Matt Hatton, Director at Machina Research (www.machinaresearch.com) the world's leading advisors on M2M, IoT and mobile broadband strategy.

Sunday, 28 January 2007

Bit late I know, but the IFPI published its report on 2006 music sales on the 17th January. On the mobile side of things they reported a few interesting nuggets:

Total value of the digital music market globally was $2bn (up from $1.1bn in '05 and $380m in '04)

Europe accounted for about 20% of the digital music market

Mobile music accounted for half of digital music, but it was a bit skewed by the figures in Japan, where mobile accounted for 90%. In Italy and Spain mobile music also dominated the digital music market

So if the digital music market in Europe is worth all of $400m (€300m-ish) then the mobile music market probably accounts for about €50m. To put that in context, the total mobile market is worth €200 billion.

Tuesday, 23 January 2007

I wrote an article for Mobile TV News recently. Here it is in all its glory...

Across Europe mobile network operators (MNOs) are mulling their options for broadcast mobile TV. Should I choose DVB-H, T-DMB, MediaFLO or something else? Is the handset range good enough and cheap enough? Should I deploy my own network or rely on a third party? Yankee Group has spent a lot of time answering these and many other important questions. However the fundamental barrier is user demand. Broadcast mobile TV is supply-driven. MNOs are desperate to develop new revenue streams to prop up flagging ARPU while equipment and device vendors are eager to sell their wares.Broadcast mobile TV has one great benefit: it builds on an established value case, i.e. TV. This makes it easier to communicate the proposition and establish the value than for other new services such as ringback tones or video telephony. According to recent trials from Vodafone, Telefonica, Canal Plus and O2, approval ratings amongst trialists is between 55% and 75% (see right). Compare this with the results of Yankee Group’s 2006 European Mobile Multimedia Survey (EMMS): 23% expressed interest in mobile TV. Admittedly the trialists, unlike the survey respondents, had experienced the service. However, trialists are unlikely to represent a random sample of subscribers, typically having a higher ARPU, and many trialists will have experienced it at a discount, or even free. In the EMMS Yankee Group asked what would dissuade subscribers from adopting mobile TV. Over 80% said they were less interested (the vast majority “much less interested”) if the handset cost €400 or the service cost €15/month. High price can turn off the most ardent advocate.

The weaknesses exposed by the Yankee Group survey have been reflected in commercial deployments. 3 Italia initially reported great success, signing up 111,000 subscribers by July 11th —six weeks after launch. The success reflects the extremely appealing content on offer: the FIFA World Cup (and an Italian win, at that). Since then, no further subscriber announcements have been forthcoming. However, by October 2006, it had slashed prices from €29/month to €19/month implying a less than successful autumn and a slim chance of hitting its target of 500,000 subscribers by end 2006. Other broadcast TV services from Virgin/BT Movio, Debitel/MFD and TIM also do not appear to have been wildly successful.

The introduction of mobile broadcast TV bucks a major trend in the TV market in recent years: demand for greater personalisation and interactivity. At a time when IPTV, cable and satellite TV operators are introducing more choice, e.g. video-on-demand and time-shifted TV, mobile operators are trying to move the other way - force-feeding users a limited choice of linear programming. The mobile is an interactive and personal device, more closely resembling the PC than the TV. Increasingly, as networks and handsets become more sophisticated, users will demand access to the same services on mobile that they have on their PC. For instance, they’ll want email and IM rather than SMS and they’ll want the internet on their mobile, not a watered down ‘mobile internet’.

So the future of mobile TV is YouTube rather than broadcast. MNOs will make some money from mobile TV on the back of strong branding and better picture quality. However, to be really successful the mobile phone must deliver access to the same personalised video services that the PC (and increasingly the set-top-box) delivers. Subscribers will increasingly demand this ubiquitous connectivity to content.

Friday, 12 January 2007

So Apple has finally come to market with its iPhone…and the crowd goes wild! Watching CNN in my hotel room in Porto there is blanket coverage of the launch. News sites and bloggers are falling over themselves to praise it to the heavens. Will it revolutionise the mobile world, or is it just another high-end phone?

Some thoughts:

Look and feel - From the pictures it looks pretty sexy, and that goes a long way as Apple proved with the iPod.

Functionality - No idea. It looks appealing but I’ll reserve judgment until I get my sweaty mitts on one. A phone with web browsing and an MP3 player isn’t exactly revolutionary! It’s all about the implementation. Today music functionality on most phones isn’t that intuitive whereas the iPhone will be able to exploit the installed base of iPod owners and their PC-based music store. A phone that’s compatible with your existing music is more appealing than ripping all those CDs again.

What no 3G? - The radio is GSM/GPRS/EDGE with WiFi. OK. Fine for browsing at home, but I live in the UK where there aren’t many EDGE deployments, so I’ll be browsing on GPRS. It’s unlikely that the WiFi element will include public hotspots, so users will be limited to sideloading at home for consumption on the move.

Price - Priced at $500 it will clearly put off a lot of people from day one. Also, the buying dynamics for mobile phones is different from MP3 players. How often do you replace your music player? Not often. Mobile phone? About every 18 months if you’re the kind of high-end user targeted by Apple.

Subsidies - Most of the mobile phones in Europe are bought by mobile operators, who then subsidise and sell on to end users. They’re unlikely to be enamoured of the idea of subsidising a device which looks like it will relegate them to a dumb-pipe role. Some will, no doubt, as they try to differentiate their service offering. Most won’t be that keen.

So the much-anticipated arrival raises many questions. Will Apple find any operators to support it? Will they even bother with the operator as a channel? Will users want to buy the phone anyway, at a substantial unsubsidised price? Will Apple become a service provider itself through MVNO deals?

Monday, 8 January 2007

So what better way to kick off the blog than with a set of predictions. It's at this point that someone usually mentions the quote from the former IBM chairman about there only being "a world market for maybe five computers." Oops. Looks like I've done that too.

No doubt some of these will also come back to haunt me. In no particular order...

Vodafone to sell out of Verizon Wireless - they've disposed of a stack of minority interests (Belgium, Switzerland) and a majority (Sweden), so why hold on to 45% of Verizon Wireless. Sure it generates a lot of money, but the new strategy of getting into emerging markets won't come cheap. So if the price is right, I think Arun will sell. Next target: the rest of Vodacom plus MTN. They cover most of Africa and the only footprint overlap is South Africa.

Hutchison Whampoa sells 3 - the X-Series announcement was effectively the last attempt to really kick-start 3 as a mobile media company. If it doesn't pay dividends in terms of market share gains, ARPU increase and crucially a reduction in subscriber acquisition costs, expect H3G to head for the door.

SonyEricsson will have a good year - what a great range of devices!

Flat-rate mobile internet becomes the norm - X-Series should shake things up a bit, following in the footsteps of web'n'walk. People want the internet on their mobile, not mobile internet. Any mobile operator that gives the people what they want will be on to a winner, even if it's only a £5/month winner.

Mobile music still won't generate any revenue (except for ringtones) - if the entire digital music market in Europe in 2006 is only worth about €300m then just how big can the mobile music market be? About 10% of that I'd say. That's backed up by the limited numbers released by the operators: a few million sales here, a few million there. In revenue terms it's not huge (particularly because there are a lot a 3-for-2 and bundled deals for example). About 0.5% of the mobile entertainment market - that puts it in perspective eh?

Everyone will plump for DVB-H - It's the only really viable choice. Anything else is a stop-gap, won't have any handsets or will arrive too late. Personally I think operators have overestimated how much people want to revert back to the days of linear programming when they're increasingly embracing interactivity and choice. YouTube on the mobile is what's really appealing, not re-runs of Lovejoy (although now I mention it, I always had a soft spot for the mulleted lothario). Shared DVB-H networks all round.

Fixed mobile convergence won’t make the splash it’s expected to in the consumer market. FMC is a supply driven proposition. Users don’t care about the technology, no matter how clever it is. They want cheap (and that includes incoming calls, broadband fees and line rental), convenient (one number please!) and a good handset (nice phones though they may be, a range that consists only of the Nokia 6136, Samsung P200 and Motorola A910 is not good enough). With increasingly large bundles of voice minutes, mobile-only options can match FMC offers for consumer appeal. However, if O2 can come up with an intuitive and simple pricing model for its low-power GSM home base-station (something like Genion for instance) it should have a small hit on its hands. BT is sensibly focusing Fusion on the enterprise now.

MVNOs will continue their onward march. MVNO competition will bite in France, depressing ARPU. Similarly E-Plus’s aggressive wholesale strategy in Germany will see it gain market share. MVNOs in Spain won’t have a substantial impact until 2008 though.

Consumer mobile IM and email won’t take off. Mobile operators are scared of alternative messaging applications due to fear of cannibalisation of SMS. As a result offers remain mostly unattractive (including per-event charging). This will largely persist in 2007.

Carphone Warehouse will suffer. Vodafone withdrew the rights to sell its contracts (although they can do upgrades) and its name is mud with everyone who tried to sign up for its free broadband offer.

Sunday, 7 January 2007

This is it. To start a blog dedicated to all things mobile. I thought it was high time I shared my miscellaneous musings on the world of wireless and maybe someone will find it interesting. Or perhaps I'll just be talking to myself.

I'm a mobile analyst, currently working for Yankee Group, with 10 years (is it really that long?) experience covering all aspects of the mobile industry. But don't hold that against me. I'm going to share my opinions (of which I have many) on what I see and hear in the mobile world, commenting on the news, reporting back on events, offering random musings and generally putting the wireless world to rights.